New Economist

I’m back

For various reasons I have been unable to blog for almost three years. But now I'm back.

It would be an understatement to say I have missed a lot. Not only the Great Recession and the not-so-great recovery, but all the fun and games in the Eurozone as well. Regulators are flexing their muscles, central banks have gone all 'unconventional' on us, European politicians are still struggling to find a lasting solution to their problems, American politics is as polarised as it's ever been, Japan is finally showing signs of recovering from its earthquake and tsunami, and China looks like it might just pull off a soft landing. Interesting times.

Economics, meanwhile, is in a right old mess. Like most of my economist colleagues I missed the warning signs, so owe you all a mea culpa. As a profession we have a lot to be humble about. It's clearly time to rethink many of the assumptions, models and verities that we once held to be true.

I don't have all the right answers, but I hope to pose some of the right questions over coming weeks and months, contributing in my own small way to the Great Economic Rethink. Along with more regular features and commentary, of course.

A word of thanks to the master econobloggers (Mark Thoma, Tyler Cowen, Brad Delong et al) and countless others who have written so many great posts in recent years. Particularly gratifying has been the number of leading academic economists who have joined the fray. Welcome!

When I get the time I will also update my blogroll, clean up the thousands of spam comments on the site, and perform other necessary site housekeeping.

Stay tuned.

Happy birthday Dmitri

Russian composer Dmitri Shostakovich was born one hundred years ago today. This year's Proms featured many of his works, and there have been special festivals in London and Austin, among others.

Tyler Cowen of Marginal Revolution has an appreciation: As of tomorrow, Shostakovich was born 100 years ago. "He has a higher variance of quality than almost any other major composer".

Perhaps so. Or maybe just a wider range of interpretations (both musical and political)?

UPDATE: Doug Merrill at afoe alerts me to a recent FT appreciation by Nigel Andrews: Dear Dmitri Shostakovich...

Brad Delong, Daniel Drezner and Mark Thoma on blogging

Another blogging academic has failed to get tenure, this time Juan Cole at Yale University. Seven bloggers discuss the case  in the latest Chronicle of Higher Education: Can Blogging Derail Your Career? I enclose excerpts below from two.

Brad DeLong (UC Berkeley) waxes lyrical about the invisible college:

I would like a larger college, an invisible college, of more people to talk to, pointing me to more interesting things. People whose views and opinions I can react to, and who will react to my reasoned and well-thought-out opinions, and to my unreasoned and off-the-cuff ones as well. It would be really nice to have Paul Krugman three doors down, so I could bump into him occasionally and ask, "Hey, Paul, what do you think of .. ."

...Over the past three years, with the arrival of Web logging, I have been able to add such people to those I bump into — in a virtual sense — every week. My invisible college is paradise squared, for an academic at least.

Here are his hopes:

The hope of all of us who blog is that we will become smarter, do more useful work, be happier and more productive, and will also impress our deans so they will raise our salaries. The first three hopes are clearly true: Academics who blog think more profound thoughts, have a bigger influence on the world — both the academic and the broader worlds — and are happier for it. Are we more productive in an academic sense? Maybe. We will see when things settle down.

Daniel Drezner (Tufts University), who failed to get tenure at Chicago, on the trouble with blogging:

Blogs and prestigious university appointments do not mix terribly well. That is because top departments are profoundly risk-averse when it comes to senior hires. In some ways, that caution is sensible — hiring a senior professor is the equivalent of signing a baseball player to a lifetime contract without any ability to release or trade him. In such a situation, even small doubts about an individual become magnified.

The trouble with blogs is that they seem designed to provoke easy doubts. Blogs are an outlet for unexpurgated, unreviewed, and occasionally unprofessional musings. What makes them worth reading can also make them prone to error. Any honest scholar-blogger — myself included — could acknowledge a post or two that they would like to have back. At a place like Yale, one bad blog post can erase a lot of good will very quickly.

There are other risks. At Chicago, I found that some of my colleagues overestimated the time and effort I put into my blog — which led them to overestimate lost opportunities for scholarship. Other colleagues maintained that they never read blogs — and yet, without fail, they come into my office once every two weeks to talk about a post of mine. Today's senior faculty members look at blogs the way a previous generation of academics looked at television — as a guilty, tawdry pleasure that should not be talked about in respectable circles.

Mark Thoma (University of Oregon) responds on blogging and academics:

I don't think my University or my Department gets the whole blogging thing yet. The perception of those who have never read blogs, and even some who have, is far from the reality. Personally, I'm not doing this for them so I don't care all that much, and tenure let's me do what I think is best.

...I can safely say that I have learned more than I ever would have imagined doing this. I can actually talk somewhat intelligently on a wide array of topics, more so than ever, and it's been great participating in and presenting debates on issues such as income distribution, skill premia, fixed exchange rates, immigration, free trade, and so many other topics outside of my main research area. And I also have a much better sense of how the public views what we do. Every economist should have to sell ideas to the public once in awhile and listen to what they say. There's a lot to learn.

Live long, die fast

Most would agree it's not simply how long you live, but staying active and healthy that matters. A long healthy life, followed by a swift death, is to be preferred to lingering ill-health. So new European research has captured some media attention. As reported in the Sunday Times, Britons live longer but we're still the unhealthiest nation in Europe:

People in Britain spend more years suffering ill health than most other Europeans, according to research by the European Union. The figures suggest that British women can expect 60 years of fit and active life. In Italy, the healthiest nation, they can expect to enjoy robust health until they are over 74.

Britons are living longer but the differences in life expectancy across Europe are relatively small. The far wider differences in quality of life are much more significant, researchers believe.

They emphasise that their findings are only provisional and their figures are only estimates. But they hope the study will encourage countries to focus healthcare on increasing the number of “healthy years” enjoyed by their citizens and not simply on extending lives.

Carol Jagger, professor of epidemiology at Leicester University and lead researcher on the EU study, said: “Life expectancies are going up for all countries but in terms of healthy life years, the UK is not keeping pace. The prevalence of disability is rising and that mirrors the fact that the prevalence of disease is rising.”

The research, based on questionnaires filled in by about 60,000 households around the EU each year, found British men can expect to live 76.2 years with an average of 61.5 years free of any disabling condition, which means that they spend just under 81% of their life in good health. This makes them the fifth unhealthiest men in the EU. The healthiest, Italians, spend 70.9 years in good health, equivalent to 92.3% of their lives.

Only Portugal, Finland and Hungary rank lower than Britain. British women live the fifth lowest number of years without a debilitating illness.

Because the figures are the first attempt by the EU at making such international quality-of-life comparisons, researchers have not yet been able to explore the reasons for the variation.

However, James Goodwin, head of research at Help the Aged in Britain, said part of the reason could be smoking and diet. “There are also differences like the way they organise access to doctors and healthcare in France and Germany, so you might expect older people there to have a better deal,” he added. “And the weather may very well play a part. There is a decreasing trend in cardiovascular disease from north to south in Europe.”

...Sir John Grimley Evans, emeritus professor of clinical gerontology at Oxford University, ...agreed that prolonging life expectancy was less important than delaying the onset of fatal disease. This would make it more likely people had brief final illnesses rather than long years of disability. “Live long, die fast,” he said.

The figures come from the European Health Expectancy Monitoring Unit project, whose work on disability-free life expectancy (DFLE) in Europe has thrown up some interesting results. A presentation (PPS file) Jagger gave last year reported that Italy had the highest DFLE for women, while for men, Italy, Belgium and Spain had similar high rates. Disability-free life expectancy was lowest in Finland for both men and women.

For a lighter perspective, Italian journalist Guido Santevecchi today dishes up a little friendly advice for Brits on Living la dolce vita:

Lunch with Gary Becker: 'I don't like small talk too much'

Underground economist Tim Harford interviews the sprightly Nobel laureate Gary Becker for the weekend FT magazine: It's the humanity, stupid (also available here).

He is 75 and looks it, with fine white hair and translucent, heavily lined skin, but he moves like a younger man. When I arrived at his home to take him up on his offer of a lift to the restaurant, I could see his silhouette coming down the stairs at a fair clip. He drives confidently. In the summer, he moves his work to Cape Cod and often swims in the ocean. Becker has always loved sport, but that, and his family, seem to be his only distraction from work. "I don't like small talk too much, so I don't try to get involved in that." It is clear from even a few minutes conversation that what really motivates Becker is the world of ideas.

If Becker has a single guiding principle, it is that the economic way of looking at behaviour applies more broadly than originally thought, and people make rational choices about crime, marriage, parenthood, education, even drug addiction. Economists have been suspicious of his call for a much broader set of values to be taken into account, while non-economists accuse him of reducing emotional decisions to monetary ones. I suggest to him that this is a straightforward misunderstanding and most people have not realised that economics is not the study of money.

"You're absolutely right. People have completely misunderstood, probably never read anything I wrote. Obviously money is important, but what I mostly study is non-monetary - discrimination, marriage. Nowhere in anything I've ever written does it say that people get married mainly or solely for money."

All the same, Becker's ideas can seem cold, even to other economists. He gives the impression of being an extremely cerebral man. "I have some novelist friends who will notice every individual characteristic. I'm very poor at that. But I think I'm a pretty good observer - in my mind - of social and economic behaviour. I think I get a lot of my stuff from that talent."

Why are some economists such snobs?

Bryan Caplan of EconLog has written his class autobiography. So has Arnold Kling, and Chris Dillow at Stumbling and Mumbling. All are worth reading (along with the comments and ensuing debate).

But of the class autobiographies so far, I was most struck by Mark Thoma's story, particularly this observation:

If you aren't from the right place, there's is a lot of baggage to overcome, more than you think as a naive new Ph.D. from my background. I used to go to NBER meetings, even presented, but I found it to be more of the same. I always felt on the outside and, though there were exceptions (and people I respect immensely because of it - they took a moment to be inclusive of someone from a lesser school - and I don't think I embarrassed myself when they did, I think I asked good questions, etc.), and I finally just stopped going. I was there to learn, not feel snubbed. It's less important now with the internet, but being from Oregon it was important to go to meetings to catch up with the latest research. But I never felt all that welcome, if that's the right word. That's too bad and there's really no reason to act that way.

That's a pity - but I know how he feels. Having attendeed a number of academic gabfests on both sides of the Atlantic, my personal experience has been that the North Americans are the most elitist (i.e. making distinctions based on which faculty you come from and the pedigree of your degrees), while continental European conferences are much less so. British conferences are somewhere imbetween.

My guess is that this is because in America the Ivy League/non-Ivy distinction is known by all, while in Europe people will often not really know how 'good' a department you come from. Greater heterogeneity and asymmetric information can sometimes be a good thing. Still, snobbery won't stop me attending NBER meetings (should they ever invite me to give a paper).

P.S. In my experience the foreign-born academics in US Ivy League universities are the worst snobs. Perhaps they still have a chip on their shoulder from their student days?

Why blogs are a good thing

Mark Thoma asks What Do Blogs Do? His post focuses on econoblogs, and he lists five positive contributions. First, they "act as a filter on information". They give more weight to more important topics. They add new information. They speed things up, and "have a collective capability to respond" when a crisis hits. And fifth, they "motivate the media to take care in how they write about economics and other topics". For those who want the fuller version, here are his "preliminary thoughts":

1. Blogs are often criticized for simply echoing information. But in doing so, they provide information to readers. Blogs act as filters on information. When you come to trust a blog, or know it well enough to judge its content, the fact that an article is posted there tells you that the person running the blog thought it was important enough to bring to your attention. Blogs can also help by pointing out information that is misleading, wrong, etc.

2. Even if you don't fully trust any one information source, there is value in repetition. As blogs echo information, it gives a sense of its importance and credibility. If a report is only discussed in one place it might be notable, but in general if an issue is being discussed most places you happen to visit, that indicates the information has some significance. So, beyond the filtering role that blogs play as they echo information from other sources, they also give it weight, e.g. if all blogs are worried about how to interpret labor force participation statistics, that is notable. And on those occasions when blogs on both sides of the political fence (or whatever fence divides the issue) are discussing an issue and coming up with similar answers, that is informative, as are the cases when heated debate erupts among reputable blogs on opposite sides on an issue.

3. Blogs add new information. On occasion, bloggers are inclined to seek out new information, for example to present economic information graphically, in tables, descriptively, and so on that helps to place economic statistics in perspective or to point in new directions. Thus, novel information provided on blogs can buttress or rebut the topic of the day, or it can point in new directions altogether. And the information does not have to be novel to enlighten and inform a discussion. There is also a role for pointing to, say, existing academic research on topics being discussed in the news and elsewhere.

4. This is something that I think is new, or at least a speeded up version of what we had in the past. In a sense, a traditional column in the newspaper is a blog as are editorials. A columnist posts articles say twice a week, then comments come back in the form of letters to the editor. There are also discussion at work, and so on. The modern blog speeds this process up considerably and allows broader participation in the dissemination of information and in feedback. When there is an important question, say a proposal for an energy tax as we saw recently, instead of the discussion being dominated by a few columnists, editorials, letters to the editor, discussion on talk shows, etc., we have almost instantaneous discussion of these topics on blogs, some from people with expert credentials, along with feedback in comments, email, etc., and many rounds of discussion happen quickly as ideas richochet back and forth.

I think this will become important when we have a crisis of some sort, say a currency crisis, and there are important policy questions that require immediate reaction. We saw something like this after Hurricane Katrina with questions about whether the Fed should lower rates, pause, or continue increasing them in light of all the uncertainty and destruction that existed. Blogs began debating this topic almost immediately and added important elements to the discussion.

When a crisis hits, we have a collective capability to respond that did not exist in the past and it will be interesting to see how well it works when it is needed.

5. In addition to their filtering role, blogs also motivate the media to take care in how they write about economics and other topics. Though anyone writing publicly develops a thicker skin, it can't be fun to be skewered for something you have written, and tools like Google and The WayBack Machine hold people accountable for things they have written in the past in ways they never were before. It's no longer possible to present misleading points of view without being immediately and thoroughly rebutted in public and if the issue is important enough, on fairly prominent platforms.

I broadly agree with each of these five points. Blogs certainly can add value - though we should remember they can also manifest less attractive behaviours too. It's a pity Mark didn't also cover some of those negatives. As he writes:

So, what have I missed or gotten wrong? I suppose there's a whole post to be written about the downside of blogs, e.g. bad information can get echoed and magnified as well as good, so on balance are blogs a positive or negative influence, questions like that. But that will have to wait for another day, or perhaps others can fill in the missing pieces.

I'll see what I can do on that score this weekend...

Mankiw's rules of thumb

Greg Mankiw has some Advice for Aspiring Economists:

Here is some advice for, say, an undergraduate considering a career as an economist.

1. Take as many math and statistics courses as you can stomach.

2. Choose your economics courses from professors who are passionate about the field and care about teaching. Ignore the particular topics covered when choosing courses. All parts of economics can be made interesting, or deadly dull, depending on the instructor.

3. Use your summers to experience economics from different perspectives. Spend one working as a research assistant for a professor, one working in a policy job in government, and one working in the private sector.

4. Read economics for fun in your spare time. To get you started, here is a list of recommended readings.

5. Follow economics news. The best weekly is The Economist. The best daily is the Wall Street Journal.

6. If you are at a research university, attend the economic research seminars at your school about once a week. You may not understand the discussions at first, because they may seem too technical, but you will pick up more than you know, and eventually you’ll be giving the seminar yourself.

Mankiw also cites his American Economist article, My Rules of Thumb (PDF). It contains this telling comments:

Throughout my life, I have been blessed with broad interests. ...My broad interests (short attention span) help to explain my diverse (incoherent) body of work. My research spans across much of economics. Within macroeconomics, I have published papers on price adjustment, consumer behavior, asset pricing, fiscal policy, monetary policy, and economic growth. I have even ventured outside of macroeconomics and published papers on fertility with imperfect birth control, the taxation of fringe benefits, entry into imperfectly competitive markets, and the demographic determinants of housing demand. None of this is part of a grand plan. At any moment, I work on whatever then interests me most.

Of course, breadth has its costs. One is that it makes writing grant proposals more difficult. I am always tempted to write, "I want to spend the next few years doing whatever I feel like doing. Please send me money so I can do so." Yet, in most cases, those giving out grant money want at least the pretense of a long-term research plan.

The greatest cost of breadth, however, is lack of depth. I sometimes fear that because I work in so many different areas, each line of work is more superficial than it otherwise would be. Careful choice of co-authors can solve this problem to some extent, but not completely. I am always certain that whatever topic I am working on at that moment, someone else has spent many more hours thinking about it than I have.

There is something to be said for devoting a lifetime to mastering a single subject. But it won’t be my lifetime. I just don't have the temperament for it.

I know exactly what he means!

How the internet is replacing television

Though the imminent death of television has been proclaimed many times, it has not become extinct and is not likely to. But the reach, and influence, of mass free-to-air broadcasting has been slowly declining for decades. Twenty years ago everyone watched the same shows. Since then the audience has become much more fragmented due to narrowcasting via cable and satellite. The internet "is becoming central to our lives" and will replace television's key role in the home, argues Observer writer John Naughton in The age of permanent net revolution (registration required):

Broadcast TV is being eaten from within, by narrowcast digital television - in which specialist content is aimed at subscription-based audiences and distributed via digital channels. But waiting in the wings is something even more devastating - Internet Protocol TV (IPtv) - television on demand, delivered via the internet. And it's coming soon to a computer screen near you.

The trouble for broadcast TV is that its business model depended on attracting mass audiences. Once audiences fragment, the commercial logic changes. And new technologies like personal video recorders (PVRs), which use hard drives rather than tape, enable viewers to determine their own viewing schedules and (more significantly) to avoid ads - think of Sky Plus, think of TiVO.

As the CEO of Yahoo! said recently at the Consumer Electronics Show in Las Vegas, the era of 'appointment-to-view' TV is coming to an end. This doesn't mean that broadcast TV will disappear, incidentally. That's not the way ecologists think. It will continue to exist for the simple reason that some things are best covered using a few-to-many technology. Only a broadcast model could deal with something like, say, a World Cup final. But it will lose its dominant position in the ecosystem, with profound consequences for us all.

The internet will take its place. Note that I do not say the web. The biggest mistake people in the media business make is to think that the net and the web are synonymous. They're not. The web is enormous, but it's just one kind of traffic that runs on the internet's tracks and signalling. And already it's being overtaken by other kinds of traffic. According to data gathered by the Cambridge firm Cachelogic, peer-to-peer networking traffic now exceeds web traffic by a factor of between two and 10, depending on the time of day. Already the signs of the net's approaching centrality are everywhere - in the astonishing spread of broadband, for example, together with the rise of online retailing, streaming media, Google and the explosive growth in internet telephony.

Naughton explains why the internet is set to take over, using blogging and digital photography as examples:

My word cloud

Here are the most common words appearing on my blog, courtesy of Snapshirts.com (use the Custom button):

Hat tip: Virgina Postrel, via Tyler Cowen